UPDATE:Legendary East released the following statement: “The goal is to relaunch a placing exercise in 2012. Legendary East will issue a formal announcement when the new structure and transaction is solidified.”

PREVIOUS: Legendary East’s proposed partner Paul Y Engineering has put its $220.5 million investment in the venture on hold. The Hong Kong construction company said it had been unable to raise the necessary funds in a share sale to investors ahead of the year-end deadline. PYE chairman Ir James Chiu maintained that the placement had received “a positive and substantial response,” but said “we anticipate that under the current difficult environment of the capital markets the placing will not be able to close before the long stop date, being 31 December 2011.” Thomas Tull unveiled Legendary East in June in partnership with China’s Huayi Brothers and with plans to co-produce English-language features and related content for a worldwide audience. In August, publicly-traded PYE emerged as an investor saying it would raise the $220.5 million by issuing new shares in Hong Kong. Under that deal, PYE was to have owned 50% of Legendary East. PYE says it hasn’t entirely thrown in the towel, however, indicating in a press release that the joint venture parties may continue to discuss options to modify the structure of the deal and relaunch a placement in 2012. In August it was announced that Ed Zwick’s The Great Wall would be the first film under the Legendary East banner. Below is the PYE release.

(29 December 2011, Hong Kong) – Bulk cargo port and infrastructure group PYI Corporation Limited (“PYI”, 0498.HK) and its subsidiary, Paul Y. Engineering Group Limited (“PYE”, 0577.HK) announced the Independent Placing Agreement, the AID Subscription Agreement and the Legendary East Subscription Agreement, each as entered into by PYE, will lapse or be terminated with effect from the long stop date of 31 December 2011. Accordingly, the Distribution in Specie (or the Cash Alternative) and the Cash Dividend (or the Scrip Alternative) will no longer proceed as they are conditional on completion of the Placing on or before 31 December 2011.

PYE will remain in its present form and its shares should trade on the same basis as they did prior to the joint announcement dated 21 August 2011. PYE will not, at this stage, be investing any cash in Legendary East Ltd. (“Legendary East”) However, some or all of the parties to the Joint Venture Agreements may continue, in the near term, to discuss potential changes to the transaction structure with a view to agreeing upon prospective terms for a modified film joint venture, with the goal of relaunching a placing exercise in 2012. Both PYE and PYI will make further announcements if such changes are agreed and will likely seek fresh approvals from their respective shareholders on any new transactions.

With PYE not proceeding with the Placing at this time, PYI’s shareholding interest in PYE remains at approximately 61.92%. Moreover, with the Distribution in Specie not proceeding, PYI will be under no obligation to purchase shares in Paul Y. Engineering (BVI) Limited, the holding company of the existing businesses of PYE, pursuant to its deed of undertaking.

Ir James Chiu, Chairman of PYE, said, “Although the Placing has received a positive and substantial response, it was not sufficient to complete the Placing and we anticipate that under the current difficult environment of the capital markets the Placing will not be able to close before the long stop date, being 31 December 2011. However, we maintain that diversification with an investment in Legendary East is beneficial to PYE. We intend to work out an improved structure with the goal of relaunching the transactions.”

Mr. Tom Lau, Chairman and Managing Director of PYI, said, “PYI will continue to work with PYE to capture future growth opportunities and to deliver sustainable long-term value for shareholders. Hopefully, with improved terms and under more favourable market conditions, PYE will be able to relaunch a placing exercise in 2012.”

Pending an announcement by PYE as to the outcome of discussions concerning a prospective revival of the film joint venture and new placing arrangements, shareholders and potential investors are advised to exercise caution when dealing in the shares of PYE and PYI.